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Both Iraqi and international specialised sources estimates Iraq's proven oil reserves at 112 billion barrels (b/b) and could reach, in the future, 214 b/b. In addition the country is endowed with 3360 billion m3 of proven gas reserves. Current production capacity is around 2.5 million barrels daily (mb/d) and could go up to 3 mb/d within few months from lifting the UN sanction, and to 3.5 mb/d a one year then after. And according to Iraqi planes, if sanction is lifted, production capacity could expand further to 4 mb/d few years later, to between 5.5 and 6 mb/d by 2010 and to 7 mb/d by year 2020. However, current export capacity is around 1.8 mb/d, and domestic demand on oil products of a maximum 0.7 mb/d. The expansion of Iraq's production and export capacities from their current levels to the above-mentioned levels requires substantial financial resources that the country is severely short off. These requirements have been estimated to ranged between 18 and 30 $bn. Iraqi sources put a tag of $20 bn as required investment to reach a 6.0 mb/d "although higher investment is needed to maintain the rate at the said level.", they emphasised. According to Iraqi plans a production capacity of 6 mb/d is achievable within 10 years from lifting the sanction. Logically development expenditures of the estimated $20 billion, if made available, should be spread over that period depending on actual work done. Considering the substantial financial requirements that are needed to achieve the above mentioned production capacities and the absolute inability of the Iraqi economy to generate such requirements outside the oil sector, this sector remains the main vehicle in this process. It has been a cliché among us the Iraqi economist to characterise our economy of being structurally distorted due to heavy reliance on oil. While it is definitely true that former economic policies did not succeed to transfer this depletable resource into sustainable production assets, two decades of veracious wars and crippling sanction will deepen this structural distortion even further. Therefore, oil remains the only possible source to generate income to finance the development of the sector itself, the national reconstruction efforts, debt servicing, and war reparation obligations etc. But this require a genuine opining of the oil sector Though all available information indicates to the readiness of the Iraqi authorities to open up this vital sector before foreign investors, however, data indicates that the country had been not receptive and thus less attractive to such investors even when privatisation programme was on full course prior to the invasion of Kuwait. The annual average of FDI inflows to the country had been extremely poor: It was only $2 million during 1983-88, and $3 million during 1986-91, representing much less than even 1 percent of the region's FDI inflow during both periods. However, in February 1990, fully appraised oil fields were included in a scheme to encourage foreign contractors to participate in the development of these fields. The terms for such involvement provided for contractors to finance their work and once the contracted field came on stream, their investment is repaid out of the subsequent production of the fields they developed. At that time, according to one oil specialist, a consortium led by US Occidental had initiated a deal to develop the North Rumaila field. During the last 2 to 3 years, Iraq offers three different co-operation venues to foreign investors in oil sector: 1. Participation in what the authorities label as "national efforts" to bring oil capacity to its pre -Gulf war level of 3.5 mb/d through normal service contracts ; 2. Develop new capacities of 2.5 mb/d to reach the target of 6 mb/d through both PSCs (a classical Production Sharing Contracts) and service contracts; 3. Exploration, and possible development of viable fields, of nine blocks in the Western Desert through service / risk contracts. Though the main terms and conditions as well as the related fields and areas are different, the common denominator among these three options is the requirement of the foreign partners to financial their contractual involvement. So far three significant agreements with a total investment of well over $7 billion have been concluded with Russia, Turkey and China. Also a Canadian company had negotiated (probably concluded by now) an exploration and development risk contract worth $250 million on one of the oil fields in the Western Desert. Another development contracts for Majnoon and Naher Umer fields had been negotiated with the French companies Elf and Total respectively. But all are dependent upon lifting the sanction. In conclusion, even if the funding for expanding production capacity is made available, through FDI or debt, expanded production capacity requires corresponding export capacities in order to generate the needed revenues. If both production and export capacities are developed, the question remains whether Iraq will be allowed, by OPEC and others, to export what it can assuming the world demand for oil tolerate it. There are few forecasts regarding world demand for oil. One of them indicates a level of 82 mb/d by year 2005. This level can easily accommodate a 4mb/b of the new production capacity from Iraq, if sanction is lifted and Iraq was allowed to return to normality. Export disposable revenues depends not only on the volume of export and price of oil alone but also on debt service and war reparation. Both are of substantial magnitudes. Ahmed M. Jiyad, Norway (This contribution is based on my paper entitled An Economy in a Debt Trap: Iraqi Debt 1980-2020, presented before a conference on Iraq Twenty-Twenty, September, London) ----- Original Message ----- From: "richardbyrne" <firstname.lastname@example.org> To: <email@example.com> Sent: Wednesday, March 14, 2001 1:30 PM Subject: query re oil sales > > > > At the conference this weekend it was suggested that with investment Iraq > may be able to increase pumping capacity up to 8 or even 12 million barrels > a day of oil, allowing it to generate large revenues for the civilian > program. > > > >I was puzzled by this because my understanding of OPEC is that Iraq would > not be allowed to pump that much oil, nor would any OPEC producer. > > > >In addition, wouldn't increasing the volume of Iraqi oil result in a > decrease in price of oil, negating any extra revenues which could be earned > from the larger volume? > > > >I've wrestled around with the increasing oil sales and can't really see any > way Iraq could earn more from oil sales in the next few years than $16 > billion apart from an increase in the oil price. > > > >Richard > > > >Voices > > > > > -- > ----------------------------------------------------------------------- > This is a discussion list run by the Campaign Against Sanctions on Iraq > For removal from list, email firstname.lastname@example.org > Full details of CASI's various lists can be found on the CASI website: > http://www.casi.org.uk > > ----- Original Message ----- From: "Colin Rowat" <email@example.com> To: <firstname.lastname@example.org> Sent: Thursday, March 15, 2001 2:40 PM Subject: FW: query re oil sales > > At the conference this weekend it was suggested that with investment Iraq > > may be able to increase pumping capacity up to 8 or even 12 million > barrels > > a day of oil, allowing it to generate large revenues for the civilian > > program. > > > > I was puzzled by this because my understanding of OPEC is that Iraq would > > not be allowed to pump that much oil, nor would any OPEC producer. > > > > In addition, wouldn't increasing the volume of Iraqi oil result in a > > decrease in price of oil, negating any extra revenues which could > > be earned from the larger volume? > > > > I've wrestled around with the increasing oil sales and can't really see > any > > way Iraq could earn more from oil sales in the next few years than $16 > > billion apart from an increase in the oil price. > > Thanks Richard, > > Yes, I think that you're right about the problem of OPEC quotas. Currently > Iraq is not required to adhere to quotas, a peculiar feature of the > sanctions that George Joffé mentioned. So, the questions are, if Iraq was > negotiating with OPEC: (i) would it ever be allowed 12 million bbl/day? and > (ii) what would happen to the price of oil? > > The answer to both depends on the growth of global demand for oil. > Economies are still very dependent upon the use of oil as a fuel. Therefore > economic growth still depends heavily on additional use of petroleum. As > economies grow, the demand for oil increases, increases the price of oil > unless supply also increases. So, Iraq's exports could grow to meet demand > growth. > > It is also possible that Iraq's oil exports could grow without growth in > world demand. Iraq could argue that it deserves a bigger slice of the "pie" > of OPEC exports. This would require other countries to reduce their own > exports if the aim is for OPEC to maintain a constant level of export. > This, I think, is a less likely scenario as (i) it's always harder to > convince people to accept less so that others can have more; and (ii) world > oil demand is likely to grow. > > I hope that this helps, > > Colin Rowat > Iraq Sanctions Project Coordinator > Center for Economic and Social Rights > 162 Montague Street > Brooklyn, NY 11201 > Tel: (718) 237-9145 x 19 > Fax: (718) 237-9147 > Mob: (917) 517-5840 > E-mail: email@example.com > Mob. mail: firstname.lastname@example.org > URL: http://www.cesr.org/isp > > -- > ----------------------------------------------------------------------- > This is a discussion list run by the Campaign Against Sanctions on Iraq > For removal from list, email email@example.com > Full details of CASI's various lists can be found on the CASI website: > http://www.casi.org.uk > > -- ----------------------------------------------------------------------- This is a discussion list run by the Campaign Against Sanctions on Iraq For removal from list, email firstname.lastname@example.org Full details of CASI's various lists can be found on the CASI website: http://www.casi.org.uk